As published on: bnnbreaking.com, Friday 9 February, 2024.
In a move towards fiscal transparency, Kenyan banks disclose foreign account holders' information to the KRA under the Common Reporting Standards (CRS). The initiative aims to curb illicit wealth accumulation and uncover assets held in low-tax jurisdictions.
In a bold stride towards fiscal transparency, Kenyan banks have embarked on a mission to disclose information about their foreign account holders to the Kenya Revenue Authority (KRA).
This unprecedented move, which commenced this year, is an integral part of the nation's commitment to the Common Reporting Standards (CRS). This global initiative, endorsed by 106 countries, seeks to promote tax transparency and curb illicit wealth accumulation.
A Global Pact for Tax Transparency
The CRS, developed by the Organisation for Economic Co-operation and Development (OECD), is a comprehensive framework that obliges participating countries to exchange taxpayer information. This includes account balances and identification details for individuals, as well as registration and control information for corporate entities.
In Kenya, the Tax Procedures (Common Reporting Standards) Regulations, 2023, signed into law by the Treasury Cabinet Secretary, mandates banks and financial institutions to report to the KRA on the details of foreigners' accounts.
Kenya's participation in the CRS will enable the KRA to access information on Kenyan residents with offshore accounts. In return, Kenya will reciprocally share information with other tax authorities. The goal is to uncover assets held by Kenyans in low-tax jurisdictions and bring them into the tax net.
The Echoes of FATCA
The CRS bears striking similarities to the United States' Foreign Account Tax Compliance Act (FATCA). Both initiatives require financial institutions to collect and report information relating to their customers' tax statuses. However, the CRS goes a step further by mandating the exchange of this information between participating countries.
Under the CRS, banks are required to provide the KRA with details on both low and high-value account holders. For accounts with a balance of less than KES 1 million, banks must report the account holder's name, address, tax identification number, and the account's balance or value at the end of the year.
For high-value accounts, defined as those with a balance of KES 1 million or more, banks must provide additional information. This includes the account holder's date of birth, place of birth, and the account's gross proceeds and gross withdrawals or payments during the year.
Balancing Transparency and Confidentiality
While the CRS aims to promote transparency, banks and the KRA are cautioned to uphold customer confidentiality in accordance with the Data Protection Act. For EU tax residents, stricter EU data regulations apply.
The KRA has assured account holders that their information will be used solely for tax purposes and will be shared only with tax authorities in other participating countries. The authority has also implemented stringent measures to protect the data from unauthorized access or disclosure.
As Kenya joins the global fight against tax evasion, the country's banks stand at the forefront of this monumental shift. By sharing information on foreign account holders, they are not only contributing to the nation's revenue collection efforts but also helping to create a more equitable and transparent fiscal landscape.
This move, though not without its challenges, is a testament to Kenya's commitment to fiscal transparency and its determination to combat tax evasion. As the CRS continues to gain traction, the world watches with bated breath, eager to see the ripple effects of this bold initiative.